Starting a business in Malaysia involves choosing the right legal structure (like Enterprise vs Sdn Bhd), which affects taxation, liability, and compliance requirements. Two common options are Enterprise and Sendirian Berhad (Sdn Bhd), widely used by small and medium enterprises (SMEs) due to their straightforward registration processes and suitability for different business needs. This article explores their key differences to help Malaysian entrepreneurs make informed decisions on which structure best aligns with their goals.

Legal Structure and Liability

When starting a business, one of the key considerations is the legal structure, which determines how the business is recognized under the law and the extent of financial liability for the owners. The legal structure affects business operations, taxation, and risk exposure. In Malaysia, businesses generally fall under two main structures: Enterprise and Sendirian Berhad (Sdn Bhd), each with different implications for liability and financial responsibility.

Enterprise Meaning

An enterprise (sole proprietorship or partnership) is not a separate legal entity. The owner and the business are considered one, meaning business debts are the owner’s responsibility. This results in unlimited liability, where personal assets may be used to settle business debts.

Sdn Bhd Meaning (Sendirian Berhad)

An Sdn Bhd is a private limited company under the Companies Act 2016. It is a separate legal entity, meaning the company’s liabilities do not extend to shareholders’ personal assets. Shareholders have limited liability, which can provide protection in financial matters.

Enterprise vs Sdn Bhd: Compliance and Regulatory Requirements

Understanding compliance and regulatory requirements is essential when choosing a business structure, as it determines the level of legal obligations, reporting duties, and administrative processes required to operate the business. Proper compliance ensures businesses remain legally protected, eligible for financial support, and capable of sustaining long-term growth. Below is a comparison of the compliance requirements for Enterprise and Sdn Bhd structures in Malaysia.

Enterprise

  • Registered with: Suruhanjaya Syarikat Malaysia (SSM) under the Business Registration Act 1956.
  • Renewal: Business registration must be renewed annually.
  • Financial reporting: No requirement for audited financial statements.
  • Company secretary: Not required.

Sdn Bhd

  • Registered with: SSM under the Companies Act 2016.
  • Company secretary: Must appoint a qualified company secretary within 30 days of incorporation.
  • Annual compliance: Required to submit annual returns and audited financial statements to SSM.
  • Regulatory obligations: More structured compliance requirements compared to an enterprise.

Ownership and Management

Choosing the right ownership and management structure is crucial for business sustainability and growth. The structure impacts decision-making authority, business continuity, and potential for expansion. Entrepreneurs should consider factors such as control, governance, and long-term scalability when deciding between an Enterprise and an Sdn Bhd.

Enterprise

  • Can be registered as a sole proprietorship (one owner) or a partnership (up to 20 partners).
  • Owners directly manage the business.
  • No distinction between personal and business assets.

Sdn Bhd

  • Owned by shareholders (up to 50).
  • Managed by a board of directors, providing a structured management approach.
  • Can transfer shares, allowing flexibility in ownership.

Additionally, the choice of structure affects succession planning and business credibility. Sole proprietorships may find it harder to transition ownership compared to Sdn Bhd, which allows for easier transfer of shares. For those looking to attract investors or establish a formal corporate structure, an Sdn Bhd may be more suitable.

Taxation

Taxation is a key factor when selecting a business structure, as it impacts overall profitability, financial planning, and compliance obligations. Different tax rates and treatment apply to Enterprises and Sdn Bhd companies, influencing long-term cost efficiency and tax reporting requirements.

Enterprise

  • Business income is considered personal income and taxed under personal income tax rates (ranging from 0% to 30% based on individual tax brackets).
  • No separate corporate tax structure.

Sdn Bhd

  • Subject to corporate tax rates:
    • 17% on the first RM600,000 (for SMEs with revenue below RM50 million).
    • 24% on income above RM600,000.
  • Shareholders can receive dividends, which are not taxed at the personal level.

Funding and Growth Considerations

Access to funding and potential for business growth are critical factors when choosing between an Enterprise vs Sdn Bhd. The structure of a business can influence its ability to secure loans, attract investors, and scale operations.

Enterprise

  • Business expansion is mainly dependent on personal savings or bank loans.
  • Funding sources may vary based on the business owner’s financial standing and creditworthiness.

Sdn Bhd

  • Can raise capital through share issuance or investments.
  • More established structure for attracting external investments and financial partnerships.

Which is the Right Choice for You?

When choosing between Enterprise vs Sdn Bhd, entrepreneurs should consider their business goals, risk tolerance, and long-term expansion plans. While an Enterprise offers simplicity and minimal compliance, an Sdn Bhd provides a structured approach, greater financing opportunities, and better business credibility. Understanding these factors can help business owners align their structure with their operational and financial strategies.

Enterprise vs Sdn Bhd Comparison Table

Feature Enterprise Sdn Bhd
Legal Entity Not separate Separate entity
Liability Unlimited Limited
Compliance Basic requirements More structured requirements
Ownership Sole proprietor/partnership Shareholders & directors
Taxation Personal tax rates Corporate tax rates
Funding Access Dependent on personal finances Potential for structured investment
Business Growth Varies by owner’s capacity Established framework for scaling

Conclusion

Choosing the right business structure is an important decision that can impact your operations, liability, and growth potential. Entrepreneurs should weigh factors like compliance obligations, taxation, and funding opportunities to determine which option best suits their needs. While an Enterprise offers simplicity and lower regulatory requirements, an Sdn Bhd provides better structure and potential for expansion.

Before deciding, it is advisable to assess business goals, compliance requirements, and financial planning. Consulting a professional, such as an accountant or business advisor, can help determine the best structure based on specific business needs.


Regardless of your business structure, securing funding is an important step for growth. Learn more about Funding Societies’ SME financing solutions to boost your business.